If you are founding an entity with multiple investors or partners, bylaws are an important step in the organization of the business. It is important for the bylaws to be very thorough, because the bylaws will inform everyone involved of their rights and responsibilities and how disputes will be resolved.
Here are the top five elements that you will want to include in your corporate bylaws.
1. Statement of Purpose
Your statement of purpose should be a description of who you are, what you do, and why.[1] Include information about who your main customers are, what you do for them, and what makes your company extraordinary. The statement of purpose is particularly important if you want to apply to become a nonprofit under the provisions of section 501(c) of the internal revenue code.
2. Corporate Governance
Bylaws should prescribe responsibilities for different roles in the organization. There are conventional roles for members of the board of directors and staff, but it is best to articulate their responsibilities in the bylaws. Boards of directors typically focus on policy decisions and oversight of use and allocation of resources, to make sure they’re being maximized and not wasted.[2] Staff positions, including executive level positions, are responsible for executing on these policy directives. It is important to include the number of seats on your board, how members are elected, their qualifications, and the length of their terms. You could also specify how, when, and where your board will conduct, and notify members, their meetings and actions.
3. Members
This may or may not be important for your company since some companies do not have members. If you do have members, though, you want to be sure to explain exactly what it means to be a member of your company. List the rights and responsibilities of your members, how and when they meet, what happens when disciplinary action is taken, and how membership can be revoked. Try to think of any question that a person might ask about becoming a member of your company and answer it in your bylaws.
4. Shareholders’ Meeting
When you include information about your shareholders’ meeting, be as specific as possible. Make sure to include information about how the shareholders will be notified of the meeting and what type of meeting it is. For example, if you have numerous shareholders, you might want to have a physical gathering of people. Businesses with a small number of shareholders may just want to have their shareholders’ meeting on paper.
5. Amending the Bylaws
Although you want to be as thorough as possible when first creating your corporate bylaws, there is the possibility that there will need to be some changes made in the future. For this reason, you want to have specific instructions about what needs to happen in order to amend the bylaws.
What Happens If You Do Not Include These Elements?
If you live in one of the states where corporate bylaws are not required for you to open your business, it might be tempting to quickly release incomplete bylaws. You should avoid this urge and make sure that your bylaws are complete when you submit them to your board for a vote.
Incomplete bylaws will cause future headaches. If you are requesting a nonprofit status, it can be denied if the statement of purpose is not written correctly. Laying the groundwork and explaining exactly how your entity will operate could save you from liability. By taking the time to create thoughtful corporate bylaws now, you can save yourself from future hassles.
Get Professional Help
In order to ensure that everything is included and worded in the clearest way possible, it is important to get help from a business lawyer. J. Muir & Associates can help you create your bylaws. Our attorneys are ready to answer any questions. Give us a call today at 786-533-1100 or contact us online.
Miami Business Lawyer here in J.Muir and Associates is the best lawyer in Miami FL.
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